How much should your KiwiSaver balance be, at your age?

By Susan Edmunds of RNZ

How does your KiwiSaver balance compare with others your age?

The retirement savings scheme has become a key part of many New Zealanders’ financial lives since it was launched in 2007.

There is now about $110.8 billion invested in the scheme. The average balance is $31,828, although that is affected by the large number of people who do not contribute to the scheme.

Milford said its average balance was about $79,000.

Data from actuaries Melville Jessup Weaver for December 2023 shows that balances generally increased as people became older.

Under 17-year-olds had an average balance of $2869. People aged 18 to 25 had an average of $8867. For those aged 26 to 30, the average increased to $17,326.

People aged 31 to 35 had an average of $21,096. Those 36 to 40 had an average of $26,829.

This might be the age at which more people withdraw their money for a first-home.

Dean Anderson, founder of Kernel KiwiSaver, said that was a complicating factor for anyone trying to compare their balances.

“You could be back to $1000 and work up again. During that 20s and 30s there is a lot of variability in averages – what we are increasingly seeing is quite a variance in balances. It’s not uncommon to see people with six-figure KiwiSavers these days in many age bands. The averages are a good reference point but don’t give the full context – if you’re on a lower income or you’ve been a stay-at-home parent for a period you want to compare to similar profile.”

People aged 41 to 45 had $34,741 and those 46 to 50 had an average of $43,600. As people entered their 50s, so too did their average balances. Those aged 51 to 55 had an average of $50,446. For 56 to 60-year-olds, their average balance was $55,632. Those in the last five years before becoming eligible for the pension had just under $60,000.

“The later someone has left [contributing to KiwiSaver] the more hard work they have to do in terms of a greater proportion of their income they have to put into it,” Anderson said.

“Then it’s about the longevity of it … the biggest question is – is KiwiSaver going go sustain the length of time that you need income in retirement? You can have a lower balance and go ‘right I’m still going to take $500 a week to top up because that’s what we need for our lifestyle’ but you’ll run out sooner. It’s about the size and how much you’re taking down isn’t so much the key point, it’s how long it will get you through retirement, topping up to your desired income levels you may have or lifestyle needs.”

He said some people might be happy burning their fund out in 10 years and living off superannuation after that but other people wanted their money to last 30 years.

After 65, balances dropped a little and hovered around the $60,000 average mark. People aged 80 to 85 had an average balance of $113,807 and those aged over 86 had $156,039. This may reflect the more limited numbers of people in these age brackets using KiwiSaver, and deliberate investment planning decisions being made.

Sam Stubbs, founder of Simplicity KiwiSaver, said the “rule of four” was a good guide to indicate how much might need to be saved.

“Work out how much you need a year and that needs to be 4% of what you have saved, and that will last forever … if you want $40,000 a year in after-tax income on top of NZ Super you probably need $1 million saved.”

He said people should not be spooked by that figure, because it assumed they would want to give their children the full $1m, and only live off the returns.

“There’s an awful lot of opportunity for you to spend the kids’ inheritance. I’ve often personally thought if you want to have a normal lifestyle and you’ve got something like half that you’ll probably be in okay territory. But it depends what you spend in retirement – some people have very expensive retirements and some don’t.

“The earlier you start, the easier it gets … it’s so much easier to start saving young and so much less is required. But if you’re 50, start doing it.”

He said regular withdrawals from a still-invested KiwiSaver were also likely to make the money last better than taking it all out of the scheme and putting it in a term deposit.

“I’ll be in a growth fund until the day I die. But I’ll just take regular withdrawals so when the market falls I won’t panic, I’m still getting my same regular income. Yes it will drop down but it will pop back up again over time. There are ways to manage what little you have to make it last longer.”

Financial planner Liz Koh said it was never too late to consider KiwiSaver.

Because it is still a relatively young scheme, it is unlikely that people retiring in the near future will be able to rely on KiwiSaver alone for their retirement, as they won’t have been contributing for their entire working life. It is important for people to get the maximum possible benefit from KiwiSaver before they retire by way of tax credits and employer contributions. KiwiSaver can be used as a low-cost investment vehicle after retirement.

Money can be left invested in KiwiSaver with regular payments coming out to supplement NZ Superannuation. Alternatively, it can be left untouched as a fund for the late stage of retirement, or a fund with a special purpose, such as covering health costs – surgery and specialists, house maintenance, car replacement or a bequest for family members. In essence, KiwiSaver is an essential part of everyone’s retirement planning.

- RNZ